Progress Reported in White House-Congress Talks on Budget

By RICHARD W. STEVENSON

Published: April 30, 1997

WASHINGTON, April 29—
The White House and negotiators from both parties in Congress inched closer to a deal on balancing the Federal budget today, with both sides saying a compromise was possible, but by no means certain, within days.

Clinton Administration officials scurried between meetings on Capitol Hill, sounding out Congressional Democrats and hearing almost nothing but criticism that the White House was too eager to get a deal with the Republicans. But officials said President Clinton was prepared to meet with the leaders of both parties to try to bridge the remaining differences, which center on the size and composition of the tax cuts demanded by Republicans and the insistence among Democrats that cuts in domestic spending be limited.

''We have an opportunity here in the next 24 hours to come to closure on this,'' said Senator Trent Lott of Mississippi, the majority leader.

The broad outlines of the deal under discussion include a net tax cut of about $100 billion over the next five years, a reduction in the growth of Medicare spending of at least $105 billion, and cuts in domestic programs greater than the $46 billion contained in the budget proposal that the President sent to Congress earlier this year.

But the two sides would still fall about $50 billion short of eliminating the deficit by the target date of 2002. They hope to plug that hole in part by adopting slightly more optimistic assumptions about the size of future deficits than Republicans had previously been willing to consider.

Last year's budget deficit was $107 billion, the lowest since 1981, and even without a budget deal the deficit is declining sharply again this year because of unexpectedly strong economic growth and a surprising surge in tax revenue. Government analysts said this year's deficit could be as low as $90 billion, and some private economists think that number could be as low as $70 billion. The total budget this year is $1.6 trillion.

Negotiators from both sides also showed a new willingness today to publicly embrace a change in the way cost-of-living adjustments are calculated for Social Security recipients, a money-saving move that budget analysts have long said would be a critical component in any deal. Both Democratic and Republican officials said they would support including in the budget a reduction in the Consumer Price Index of a quarter of a percentage point, or perhaps a bit more, to reflect revisions in the index being studied by the Bureau of Labor Statistics.

Such a change would save tens of billions of dollars by 2002, the year by which both parties have pledged to eliminate the Federal deficit. Some influential Democrats and Republicans had been pressing for a far bigger revision on the ground that the index appears to overstate inflation by more than one percentage point, but they ran afoul of intense opposition from the elderly and other powerful interest groups.

As recently as Monday, Senator Lott had said Republicans could not vote for any change in the index. But today he said that if the change derived from recommendations by the Bureau of Labor Statistics, ''that would be a different matter.''

Administration officials were slightly more cautious, especially after spending the day hearing warnings from Congressional Democrats that they would not go along with a deal that did not fully protect spending on education, health care, the environment and welfare.

Senate Democrats told Administration officials at a closed-door meeting that they were particularly concerned about the White House's apparent acquiescence to Republican demands for tax reductions that would become increasingly costly after the five years covered by the agreement they are negotiating. Republicans are particularly intent on a deep reduction in the capital gains tax on profit from the sale of stocks, real estate and other assets.

Tax analysts project that a reduction in the tax could generate additional revenue for the Government in the short run by encouraging people to sell assets that they would otherwise have held onto. But there is deep disagreement among economists about whether that effect would continue in the long run, with one camp insisting that the cost of the tax cuts would mount rapidly, and the other arguing that the tax cuts would spur greater economic growth and a continued surge in revenue.

Democrats in both the House and the Senate also subjected Administration officials, including the White House chief of staff, Erskine B. Bowles, to sharp criticism of the Administration's handling of the budget negotiations, saying Mr. Clinton should strike a more aggressive posture with Republicans and not be so eager to get a deal.

''Almost everyone there believes strongly that we need a balanced budget,'' Mr. Bowles said after meeting with House Democrats. ''Some would rather for us to wait and discuss it for a longer period. ''

But Administration officials as well as Mr. Lott are pushing hard to wrap up a deal before the President leaves on a trip to Mexico next week. While both sides said they were prepared to continue negotiating indefinitely, the negotiators have said their job will become harder as time passes.